How international e-commerce is changing digital payments in Brazil
Ebanx isn't new to the payments technology game in Latin America, having focused on cross-border e-commerce technology a few years ago to allow consumers in that region to make purchases from international merchants.
What the Brazil-based fintech startup is fairly new at is how to quickly change its stripes to take advantage of the changing digital payments landscape, something that other payment processors and technology providers have been doing in other countries as a regular part of business. But Ebanx is catching on fast.
"In the past year, we have changed from what we used to be as a cross-border payments system operated through APIs, and we are now investing in other fronts, and one is to make us closer to the end user," said Ariel Patschiki, product director for end user at Ebanx Pagamentos Ltd.
With that philosophy, Ebanx rolled out Ebanx Go, a digital payments account available for Brazilian consumers to make payments online or at a physical point of sale through a virtual card via an Android or iOS app, or a linked physical Ebanx Visa card.
In the past few years, Latin America has become a coveted market for payments tech developers and other service providers who see a sleeping giant. As such, Ebanx Go enters a field in which many Brazilians still use cash or try digital payments through PayPal, the country's payment voucher system of Boleto Bancario or MercadoPago.
"Brazil is one of Latin America's major markets for global commerce, and most players are focusing on ways to penetrate the market," said Talie Baker, senior analyst with Aite Group. "The Brazilian market is particularly attractive for digital payments because the majority of people in the population have internet access, even when they do not have a bank account."
Ebanx conducted research and cited Americas Market Intelligence data in predicting e-commerce will grow in double digits in Latin America, reaching $210 billion in transaction value by 2022, or double the current $101 billion.
Meanwhile, 52% of e-commerce transactions are completed with credit cards, even though Latin America has a relatively small regional credit card penetration at 19%. Additionally, 15% of e-commerce payments are made with cash vouchers, but 13% are with digital wallets, a bit more than the 12% with debit cards.
"Brazil is a market focus for Mastercard and Visa real-time payments platforms of Visa Direct and Mastercard Send, both of which facilitate in-country and cross-border payments," Baker said, noting that about 25% of the Brazilian consumer population has either a debit or credit card.
Regulatory changes in Brazil have increased competition in financial services, so many players are trying to get a foot in that door, mostly focusing on underbanked consumers with easy-to-use mobile products, which is where Ebanx sees great potential for its digital account platform.
"Ebanx Go was developed to solve problems for merchants and address the huge underbanked population, as we already have 55 million people who can purchase with Ebanx," Patschiki said. "We are not looking to replace traditional banks in Brazil, rather we are looking to help the way people can make purchases."
Consumers in Brazil can use the Boleto Bancario cash voucher system to load money into the Ebanx Go digital account. That type of transition allows them to take full advantage of the digital account or accompanying card in terms of making payments and earning cash-back rewards, tracking transactions and getting instant confirmation, as well as taking advantage of other Ebanx services.
The Ebanx Go digital account is still in testing with 10,000 Brazilian consumers through 18 participating merchants, including AliExpress, Gearbest and Spotify; and the company plans to fully launch throughout the country in the second half of the year. Further expansion is targeting other Latin American countries, Mexico and possibly parts of the U.S.
There are no fees for opening, depositing, maintaining or transferring money to the Ebanx Go digital account. Purchases made through various digital partners deliver a 5% cash-back reward for the consumer. Users can apply cash-back rewards to future purchases or transfer that money to other accounts.
"This is good for our main customers, who are merchants who partner with us, in terms of having a cash-back benefit," Patschiki added. "It gives Brazilians our payment instrument in the palm of their hands and is a very easy, straightforward way to purchase."
It also gives Ebanx Go a place on the digital payments landscape, one that figures to get more crowded over time in Brazil and throughout Latin America.
"At present, there is a definite uptick in the number of players entering the market," Aite's Baker said. "So, it will be a bit of a wait-and-see game to see which ones have staying power."